Tuesday, September 18, 2012

What Good Are Labels If They Are Not True?

“In my
recent book, Living Economics:
Yesterday, Today and Tomorrow (2012) [GK: I recommend that you read
Boettke’s book], I urge the reader to recognize the distinction between
"mainline" and "mainstream" economics. Mainline
economics, I contend, is defined by the substantive propositions that have been
held by economists from at least the time of Adam Smith. In my
characterization, those substantive propositions relate to the rational choice
postulate, and the invisible hand proposition (and the reconciliation of
rational choice and the invisible hand through institutional analysis).
This is what unites economic thinkers through time from David Hume and
Adam Smith, to Mises, Hayek and Buchanan. As Lord Acton once wrote, it is
the traveling of the minds of the men who sit in the seat of Adam Smith that
deserve serious attention.

On the
other hand, mainstream economics I contend is a sociological designation, and
refers to what is currently fashionable in the research and teaching of elite
professional economists at any point in time. Thus, the term mainstream
does not reflect any one set of substantive propositions, but shifts constantly
depending on what is the current state of the art among professional economists
at the elite scientific/scholarly institutions. Sometimes the mainline is the
mainstream, but at other times it is not. It is at this critical
junctures when the mainstream deviates from the mainline, that labels become
particularly important in aiding acts of intellectual entrepreneurship which
attempt to bring the mainstream back into line with the mainline of economic
thought.”

Comment

I recommend
that you read Boettke’s new book - he is an excellent teacher; it reveals useful biographical background on
where he is coming from and of his approach to his teaching of economics.

The
distinction that he makes between “Mainstream” and “Mainline” economics is interesting. It does not surrender credibility only to "Mainstream" economics; nor accept the Heterodox label often thrown at it. Regular readers will know how I would
respond to this definition of “mainline” as economics with the “rational choice
postulate, and the invisible hand proposition (and the reconciliation of
rational choice and the invisible hand through institutional analysis)”.

I am disappointed by Boeetke’s implied praise of the “rational
choice postulate” and even more so by “the invisible hand proposition”, because
the former does not explain actual behaviour, unless you accept the “MaxU”
proposition (Deirdre McCloskey) which is a theoretical presumption and is not
supported by evidence in the real world – it is an “ought” not an “is”.It probably reflects his “Austrian”
economic background.Nor am
I impressed with his linking the “the invisible hand proposition”, as he
understands it directly to Adam Smith.It was wholly invented following careless remarks by modern (Post-1948)
neo-classical economists, for example by Paul Samuelson (see: Kennedy, G. 2010: “Paul
Samuelson and the Invention of the Modern Economics of the Invisible Hand”,
History of Economic Ideas. Vol. xviii, no. 3, pp 105-19;), and seized upon by
both neo-classical and ‘Austrian economists (see Kennedy, G. 2012: “The Myth of the
Invisible Hand – A View from the Trenches” HERE

Boettke
cont.: But the character of mainstream economics as Samuelsonian in form was
never displaced. Mainline ideas that could be readily adapted to the
language of Samuelsonian economics had greater traction than those that did not
easily fit into that form of scientific/scholarly argument. Thus, we have
a slightly separate debate that must be waged --- which has its own labels
which must be understood. And that is the debate underlying the claim to
the mantle of science --- the deep waters of epistemology, methodology of
economics, and the philosophy of science. Methodology matters because it
shapes not only the questions pursued by scientists/scholars, but even more
importantly determines what is considered a good answer to those questions.
Without a shift in perspective over what constitutes the scientific
enterprise in economics, various teachings of the mainline of economic thought
will be dismissed scientifically even as they get a nod to their wisdom and
good sense.

In fact, I
have used throughout scientific/scholarly, but in the modern methodology of
economics the goal is to be rigorously scientific, the scholarly quest for
human understanding is dismissed as insufficient. Thus, the way that the
mainstream understands the teachings of the mainline of economics is through an
act of translation of the rational choice postulate and the invisible hand proposition
into a language which would make those core teachings incomprehensible to the
leading practitioners of mainline economics in the 18th, 19th, and early 20th
century. Methodology matters.

But remember
my point that we want to do Good Economics, and have as wide an impact on our
scientific peers as possible. Fidelity to a label should be the least of
our concerns, but truth in economics should be the utmost of our concerns.
We need to think clearly, write clearly and speak clearly. And our
thinking, writing and speaking should be about the mainline teachings of
economics and political economy as passed down through the ages by the Scottish
Enlightenment Moral Philosophers, the French Liberal Poltical Economists, the
British Utilitarians, and the Austrian School Economists (and the subsequent
development of economic thought in the second half of the 20th century that
drew on these various traditions). To accomplish this task of providing sound
theory and clarity of exposition, we rely on exact theory (pure logic of
action), institutionally contingent theory (comparative institutional
analysis), and empirical analysis (history, policy applicaiton, statisitcal
work, ethnography, etc.). Each step in a complete social scientific
analysis has different epistemological problems to be addressed and
methodologies of analysis. Confusion results when we fail to remember the
distinctions and in the looseness of language blur the distinctions. But
that we need the skills of critical reasoning to do sound theorizing, and the
skills of empirical analysis to do history should never be doubted. The
master economist and political economist does both theory and history.

Mainline
economists sought to produce sound argument (not just valid), and thus theory
aligned with real world relevance. The mainline economists from Smith to
Hayek, did not produce free floating abstractions that were tested against
momentary concretes. That was the mistaken path that mainstream economics
embarked upon in the second half of the 20th century and continues to plague
the practice of economics to this day. So if those of us who find the
arguments of mainline economics persuasive want to impact the mainstream of
economics and pull in the direction of the mainline teachings of economics and
political economy we must engage in methodological debate. We cannot
ignore these issues. There is no such thing as philosophy free science, there
is only science guided by an articulated and defended philosophy or science
guided by an inarticulate and undefended philosophy."

Comment

Meritorious
objectives indeed, but a historical perspective that recognizes that “The
master economist and political economist does both theory and history”, surely ought
to be based on an accurate account of the very roots of what “Smith actually said and not be based on an anachronistic transfer to Smith of modern
ideas about invented attributions about what he supposedly said that
conveniently gives unjustified credibility to those same modern attributions.

Follow the
link to read Peter Boettke’s post on the “Coordination Problems” Blog.